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FTSE 100 keeps head above water at close: Facebook in focus

The Nasdaq on Wall Street is down over 88 points at the time of writing, at 7,420.
Mark Zuckerberg
Facebook was the story of the day. Pictured: Zuckerberg
  • FTSE 100 closes positively

  • Zuckerberg suffers US$16bn dent to fortune in Facebook stock rout

  • ECB keeps interest rates on hold and recommits to end stimulus scheme

  • BATS top Footsie riser

FTSE 100 closed in positive territory, just, as the market frets about geopolitical issues and tech stocks in New York took a hit after Facebook (NASDAQ:FB) results.

The stock suffered a severe sell-off as the social media giant missed equity analysts’ estimates on revenue and user growth.

Then it warned that revenue growth would continue to decelerate in the second-half of 2018.

The Nasdaq is down over 88 points at the time of writing, at 7,420.

Back to the UK and FTSE 100 closed up nearly five points at 7,663, while mid-cap cousin FTSE 250 closed  up around 15 at 20,768.

Top riser on Footsie was British American Tobacco (LON:BATS), which curled up 5.13% to 4,177p.

It saw a fall in pro-forma revenue in the first half, but underlying earnings remained on track for the full year.

Top loser was utility SSE (LON:SSE), which dropped 5.86% to 1,260p.

3.45pm: Zuckerberg fortune takes US$16bn hit from Facebook wipeout

The chief executive and co-founder of Facebook, Mark Zuckerberg, saw his fortune take a hit of almost US$16bn as the social media giant continued what looks to be the biggest one-day stock plunge in US stock market history.

At nearly 11am New York time (4pm GMT), shares in Facebook were down nearly 20% at US$175.5, a fall that could slash US$124bn from its market cap, almost four times the entire market cap of fellow social media firm Twitter Inc (NYSE:TWTR).

3.15pm: ECB reaffirms end of stimulus in December and keeps interest rates at record lows

The European Central Bank (ECB) has reaffirmed the end to its €2.6 trillion stimulus programme this year, saying the current global trade upheaval did not warrant any serious deviation from its current plans.

The ECB also kept its interest rates at zero for the main borrowing rate and -0.4% for banks that keep their cash at the central bank.

ECB president Mario Draghi told reporters at a press conference that at this stage “We [the ECB] don’t see the need to modify or to add new language to our forward guidance on rates,”.
However, Draghi did highlight some signs of weakness emerging in the economy of the bloc, including a loss of momentum in exports and the risks of a snowballing trade war.

The meeting follows closely from the ECB’s last one in June, when it decided to wind up its stimulus scheme in December 2018 as inflation rebounded and employment reached record levels.

Neil Wilson, chief market analyst at Markets.com, commented: “On forward guidance Draghi was happy with last month’s efforts clearly, saying that the enhanced forward guidance ‘has been very effective, we see no need to modify our language’. In other words markets have got it right and reflect what the ECB currently expects.”

He added: “[Draghi] was again fairly bullish on inflation with a sustained pick up seen – continuing the tone set when he spoke to the European Parliament on July 9th. Uncertainty around the inflation outlook is receding and convergence with the target is apace, according to Draghi. We question whether that is in fact the case as there is a strong sense that core inflation is not rising fast enough and therefore we are at risk of ‘bad’ inflation pushing up prices, forcing tightening that the broader economy is not ready for.”

The currency market had a fairly muted reaction to the news, with the euro relatively flat against the pound at £0.8886.

2.45pm: US stocks see mixed open as Nasdaq dragged down by Facebook

Wall Street’s main indices were mixed at the open on Thursday, with the tech-heavy Nasdaq being dragged into the red as the Facebook selloff continued.

The Nasdaq was down 74 points at 7,857 shortly after the open, followed by the S&P 500 which was down 7.4 points at 2,838. The Dow Jones Industrial Average started off on a better footing, up 120 points at 25,534.

Facebook's stock continued its slump from Wednesday, dropping 18.3% to US$177.7 shortly after the opening bell.

The FTSE 100 meanwhile had broken its neutral streak and was down 12 points at 7,645.

1.45pm: Wall Street expected to open lower

US stocks are expected to open lower on Thursday morning, with the Nasdaq expected to suffer particularly heavy as the fallout from Facebook Inc’s (NASDAQ:FB) quarterly earnings slide continues.

The social media giant, part of the FAANG group of tech stocks, saw roughly one-fifth of its value wiped away in the extended trading session on Wednesday as its quarterly earnings report missed expectations.

The plunge was also exacerbated by a conference call in which the group said it expected revenue to “continue to decelerate in the second half of 2018”, sending investors into panic mode.

There is also speculation among some analysts that the disappointing update and weak outlook could lead to the corporation falling behind its FAANG peers, which include Netflix Inc (NASDAQ:NFLX), Apple Inc (NASDAQ:AAPL), and Google parent Alphabet Inc (NASDAQ:GOOG).

Jasper Lawler, head of research at London Capital Group, said: “Facebook is expected to see its biggest one day sell off when it opens later today. The big question will be whether it will bring down the rest of the FAANG stock? Whilst we expect Facebooks results have a short-term impact on FAANG stock, it’s more likely that we will start to see a de-coupling of Facebook from the group.”

In London, the FTSE 100 was still stagnant, down 2 points at 7,655. 

12.15pm: Brent price up as Saudi Arabia cuts oil shipments after tanker attacks

The Brent crude price rose on Thursday after Saudi Arabia, the world’s biggest oil exporter, suspended oil shipments through the Red Sea after an attack on two of its tankers.

The kingdom said it was “temporarily halting” shipments through the Bab Al-Mandeb shipping lane through the Red Sea following an attack by Yemen’s Houthi movement, which is aligned with Iran.

An estimated 4.8mln barrels per day of crude oil and refined petroleum products were transported through the Bab Al-Mandeb lane in 2016, although most of Saudi Arabia’s oil exports leave through the strait of Hormuz on the other side of the country.

While the suspension in the Red Sea is not as critical as a suspension through Hormuz, the restriction may impact the supply of crude and associated products in the West due to the longer voyage time around the Cape Peninsula of Southern Africa.

In lunchtime trading, Brent crude was up 0.4% at US$74.27 a barrel.

11.30am: FTSE 100 little changed as morning ends

The FTSE 100 was relatively flat going into lunchtime as an initially positive start was pulled back by a decline in blue-chip stocks.

Markets were expectantly buoyant following the Trump-Juncker meeting yesterday after a joint US/EU trade initiative lowered tensions over the potential for more tariffs between the two.

However, the initial positivity was checked by poor performance by oil major and FTSE 100 constituent Royal Dutch Shell PLC (LON:RDSA) after its cost of supplies, a measure of profit, failed to meet analysts' estimates of US$5.96bn despite jumping 30% to US$4.69bn.

The additional announcement of a US$25bn share buyback failed to satisfy investors enough to offset a decline in the stock, which was down 2.1% at 2,599.5p in late morning trading.

Connor Campbell, financial analyst at Spreadex, said: “A conflicted Super Thursday of UK earnings, and the continued redness of much of its commodity sector, meant that the UK index was basically unchanged as the day went on.

He added: “The FTSE has really struggled to break out of the 7650 to 7700 trading bracket of the last few weeks, with such an over-stuffed corporate calendar doing it no favours.”

As the afternoon approaches, investors will turn toward the continent as the European Central Bank’s (ECB) governing council holds a monetary policy meeting where it is widely expected to keep rates steady despite a bounce in eurozone PMI surveys and the positive trade talks with the US.

Joshua Mahony, market analyst at IG, said: “The recent outline for the end of [quantitative easing] pushes the emphasis onto quite when rates begin to shift. However, if history tells us anything, it is that [ECB president Mario] Draghi will always seek to devalue the euro where possible.”

As lunchtime approached, the FTSE 100 was down 1 point at 7,656.

10.30am: Jardine Lloyd Thompson CEO says firm preparing for no-deal Brexit

The chief executive of FTSE 250 insurance broker Jardine Lloyd Thompson Group PLC (LON:JLT) has told Reuters that the company is preparing for the possibility of a no-deal Brexit next year.

Dominic Burke said the company was “working on a position of a no-deal Brexit” but JLT added that it was confident in its ability to service clients across Europe.

While Burke did not specify the changes that were being made, he said the company was building a stronger European platform and had purchased a specialty marine insurance broker in Hamburg.

This followed the acquisition of Belgian broker Belgibo last August, which the firm said would provide a larger continental European presence and ensure its clients in the EU, Iceland, Liechtenstein and Norway could access its services following Brexit.

In mid-morning trading, JLT shares were down 1% at 1,386p.

9.45am: German ministers welcome US-EU trade initiative; China sinks Qualcomm deal

Ministers in Germany have hailed a trade initiative agreed on Wednesday by US president Donald Trump and European Commission president Jean-Claude Juncker, with one describing it as a breakthrough that had won the EU time.

Speaking to a news conference in Seoul, German foreign minister Heiko Maas said that while the initiative was “not yet the result we were aiming for”, it had made “a positive result in the whole discussion … on free trade and protectionism more likely than before”.

Maas added that it was good the two entities would work together on unfair trade practices and the reform of the World Trade Organisation, saying the US and the EU were “partners and allies with common values and interests”.

The German economy minister Peter Altmaier was much more enthusiastic, hailing the talks as a “breakthrough” that could avoid a trade war and save millions of jobs.

The developments on Wednesday marked a stark contrast to the much tenser trade spat between the US and China, which helped to torpedo a US$44bn deal for China’s Qualcomm to acquire Dutch chipmaker NXP Semiconductors as Chinese regulators allowed the deadline for the agreement to lapse without approving the takeover.

9.00am: Early gains

The FTSE 100 was up 14 points at 7,671.91 amid a welter of results – the start of the rush before the City goes into its annual month-long summer hiatus.

So, it was hardly surprising the morning’s big movers were results-driven with British American Tobacco (LON:BAT) and replacement hip maker Smith & Nephew (LON:SN.) both up 4% on the back of interims.

It was a case of papering over the cracks for Royal Dutch Shell (LON:RDSA), the oil major, and Guinness-maker Diageo (LON:DGE), which both announced impressive share buyback programmes.

Returning excess capital is always seen as a good thing.

However if earnings aren’t up to snuff (Shell), or dark clouds are looming on the horizon (Diageo said outlook was a little murky), then the net impact of such largesse tends to be minimal.

In fact, Shell fell 1.1% early doors, while Diageo was off slightly less.

Proactive news headlines:

Franchise Brands PLC (LON:FRAN) swung into an interim profit as all four brands - Metro Rod, ChipsAway, Barking Mad and Ovenclean –  improved their performance. Metro Rod, the largest of the franchise operations, completed 88,000 jobs during the period, said Stephen Hemsley, executive chairman, a 15% rise on the same period a year ago.

AFC Energy PLC (LON:AFC) has received the non-refundable deposit from Southern Oil as part of the recent order of one of its hydrogen power units. The AIM-quoted firm will now start working with Southern to confirm the final scale and cost of the unit, which is to be installed at the oil refiner’s advanced biomass facility in Queensland, Australia.

Online merchandising, search and eCommerce personalisation provider Attraqt Group PLC (LON:ATQT) expects to meet full-year expectation, it said in its interim results. The first half of the year saw revenue rise 53% to £8.4mln from £5.5mln in the same period of last year, with like-for-like (LFL) sales up 11%.

discoverIE Group PLC (LON:DSCV) maker and supplier of customised electronics, said it was on course to deliver earnings in line with expectations following a strong start to the financial year. Sales rose 12% at constant exchange rates and 3% organically, while orders increased 16% at constant currencies, or 7% organically.

Range Resources Limited (LON:RRL) (ASX:RRS) is to raise £1mln through a share issue to accelerate development of its assets in Trinidad. The company will issue 909mln shares at 0.11p a pop.

Solo Oil PLC (LON:SOLO) has named Alastair Ferguson as the successor to Neil Ritson, who is due to retire from his position as chairman. Ferguson immediately joins as non-executive director before taking the reins from Ritson, who leaves his position on 6 August and will become a technical advisor to the company.

Savannah Resources PLC (LON:SAV)  has reported “encouraging” results from its ongoing reverse circulation (RC) and diamond drill (DD) programme at the Mina do Barroso project in Portugal. The AIM-listed miner said RC and DD at the Grandao and Grandao Extended Deposits (GED) had identified “significant expansions to the mineralised pegmatite bodies”, with the expansion at GED supporting further increases to the existing resource estimate of 14 Mt at 1.1% Lithium Oxide.

Higher coal and vanadium prices have lifted interim revenues at mining royalty specialist Anglo-Pacific PLC (LON:APF). Royalty income will be in a range of £17.5mln to £18mln in the half year to June, a 10% increase year-on-year after a very strong second quarter.

Kazera Global PLC (LON:KZG) has commenced a drilling campaign to establish a JORC resource at its Namibia Tantalite Investment Mine (NTI). The AIM-listed resources investment group said early drill cores from the MSA Group, which it commissioned to carry out an exploration programme in June, were “highly encouraging” with the programme ultimately intended to establish a JORC resource and understand the mineralisation on the property as well as the future value of the operation.

Capital Drilling Ltd (LON:CAPD), a leading drilling solutions company focused on the African markets, has announced the appointment of Michael Rawlinson as an independent non-executive director and the company's Remuneration Committee Chairman with effect from 1 August 2018. The group said Rawlinson will replace Craig Burton, who intends to step down from the board on 31 August 2018.

Wolf Minerals Limited (LON:WLFE) (ASX:WLF) has advised investors that the ASX has granted the company a trading halt in its shares pending an announcement on its financing arrangements. The trading halt will remain in place until the opening of trade on the ASX on Monday 30 July 2018, or earlier if an announcement is made to the market. The company's shares will continue to trade on AIM during this period.

6.45am: Calm before storm

UK equities were expected to open little changed ahead of an incredibly busy company results schedule and after yesterday's sketchy EU-US trade agreement.

Having fallen 51 points to close at 7,658 yesterday, the FTSE 100 was expected to open around 3 points higher, although with the likes of Shell, Astra, Diageo, Anglo American, BAT and Compass set to update the market, the Footsie's fate will largely depend on how the market reacts to the deluge of results.

In the US, however, stocks rallied into the close on the heels of reports that President Donald Trump and European Union official Jean-Claude Juncker have avoided a trade war between the US and the eurozone.

“US President Donald Trump and European Commission President Jean-Claude Juncker have announced that the eurozone and the US will launch a new round of trade negotiations,” reported Danske Bank.

“In a joint statement, the two stated that the negotiations are aimed at (1) eliminating all tariffs, trade barriers and subsidies related to non-auto industrial goods, (2) reforming the WTO and (3) reducing trade barriers in general across the Atlantic. Importantly, all new tariffs (incl. automobile tariffs) will be suspended during the negotiation period thereby dampening near-term trade war fears. The eurozone also pledged to raise its imports of US soya beans and US liquefied natural gas,” the bank added.

“The announcement was somewhat surprising giving recent rhetoric from both Trump and Juncker. It is, however, still much too early to call this announcement more than a semi-truce even if US equities jumped and USD FX/FI sold off on the announcement,” the bank noted.

Around the markets

The Dow Jones Industrial Average gained 173 points, or 0.69% to close at 25,415, led higher by Microsoft Corp and Nike.

Meanwhile, the tech-laden Nasdaq gained 91 points, or 1.17% to close at 7,932, led higher by Check Point Software and Tesla.

The S&P 500 index closed 0.91% higher to 2,846, ensuring the broad-market index emerged from correction territory. The S&P 500 fell into correction territory on February 8, hitting a low of 2,581.

Approaching the last knockings in Asia, the Nikkei 225 in Japan and the Hang Seng in Hong Kong were both in negative territory.

The Nikkei was down 44 at 22,570 and the Hang Seng was off 228 at 28,693.

On the home front, there may have been busier days for big company results but not recently.

READ: Blue-chip deluge on Thursday with Royal Dutch Shell, AstraZeneca and Diageo (and more) set to report

Big names set to report include Shell, Astra and Diageo.

When Royal Dutch Shell updates the market, investors will want to be at best impressed with cash-flow, at worst reassured.

For many Shell shareholders, it is all about the dividend and whether cash flow can cover the pay-out.

“Shell’s cash flow was disappointing in 4Q17 and again to some extent in 1Q18, and explained by management in terms of a number of one-off negative factors. With these falling away, and Shell’s exposure to strong LNG pricing as well as crude prices, we expect a sharp improvement in underlying CFFO to above USD10bn in 2Q18,” HSBC analysts said in a recent preview note.

Product sales at AstraZeneca have plunged in recent years due to the loss of patents on a couple of its blockbuster drugs such as Crestor (statin) and Seroquel (bipolar).

That cycle looked to have come to an end in the final quarter of 2017 when sales edged higher, but they fell again in the first three months of 2018.

If Astra's new drugs step up to the plate, this could prove to be Astra’s turnaround year.

The board of drinks brands giant Diageo might have quietly raised a glass of Johnnie Walker to the news that the EU and US are showing signs of coming to some agreement on trade tariffs.

US whiskey, including brands such as Diageo's Bulleit bourbon, now face an additional 25% tax in the EU, as Europe looks to respond to tariffs placed on European imports in the US. Similar levies are being put in place in China, Canada and Mexico.

Significant announcements expected

Interims: AstraZeneca PLC (Q2) (LON:AZN), Royal Dutch Shell PLC (Q2) (LON:RDSA), Diageo PLC (LON:DGE), Anglo American PLC (LON:AAL), Smith & Nephew PLC (LON:SN.), British American Tobacco PLC (LON:BATS), Inchcape PLC (LON:INCH), Schroders PLC (LON:SDR), RELX PLC (LON:REL), National Express PLC (LON:NEX), SEGRO PLC (LON:SGRO), Intu Properties PLC (LON:INTU), Bodycote PLC (LON:BOY), Robert Walters PLC (LON:RWA), Vesuvius PLC (LON:VSVS), Howden Joinery Group PLC (LON:HWDN), Franchise Brands PLC (LON:FRAN), Lancashire PLC (LON:LRE), UBM PLC (LON:UBM), Virgin Money PLC (LON:VM.)

Finals: Sky PLC (LON:SKY), Renishaw PLC (LON:RSW)

Trading updates: Compass Group PLC (LON:CPG), Johnson Matthey PLC (LON:JMAT), Sage Group PLC (LON:SGE), Tate & Lyle PLC (LON:TATE), Countrywide PLC (LON:CWD), Daily Mail & General Trust PLC (LON:DMGT), Aveva Group PLC (LON:AVV), Sophos Group PLC (LON:SOPH), KAZ Minerals PLC (LON:KAZ), Countryside Properties PLC (LON:CSPC)

Ex-dividends: To knock 3.2 points off FTSE 100 index - Royal Mail PLC (LON:RMG), SSE PLC (LON:SSE)

Economic data: US weekly jobless claims; US durable goods orders; US international trade in goods

Around the markets

  • Sterling: US$1.3203, down 0.12 cents
  • 10-year gilt: yielding 1.268%
  • Gold: US$1,239.30 an ounce, down US$1.70
  • Brent crude: US$74.30 a barrel, up 37 cents
  • Bitcoin: US$8,209.63, down US$17.46

Business headlines

The Times

US President Donald Trump last night announced a pact with European Union to avoid a trade war, agreeing to work with the bloc on abolishing transatlantic tariffs.

Economists have warned that demand in the housing market remained weak despite the number of mortgages approved for house purchases in June reaching a nine-month high.

American chip-maker Qualcomm is abandoning its proposed $44 billion takeover of NXP Semiconductors after it emerged that Chinese regulators were not likely to give the deal the go-ahead.

John McFarlane, the chairman of Barclays and the main lobby group for financial services, has said that London will remain one of the world’s top financial centres and will not suffer any long-term damage, playing down the impact of Brexit.

The Daily Telegraph

Facebook shares fell as much as 25% in after-hours trade after the technology giant posted a rare miss on revenue and user numbers.

Santander’s UK business registered a 15% decline in half-year profits due to “challenging” market conditions in Britain; however, the Spanish banking group posted overall solid results.

Retailer Joules reported a 29% rise in pre-tax profits to £13 million as it continued to diversify the business towards homeware and lifestyle products, defying a meltdown on the high street.

Apple is unlikely to use Qualcomm’s cellular modems in the next iPhones, the chip maker’s chief financial officer George Davis has said, cutting the company out of one of the consumer electronics industry’s best-selling products.

MPs have warned that the contract undertaken by Capita to outsource NHS England’s administration put patients at risk of serious harm.

The former Royal Mail chairman and Asda chief executive Allan Leighton has counted himself out of the running to replace current Stobart chairman Iain Ferguson.

The Guardian

Ryanair has revealed plans to cut its Dublin-based aircraft fleet by 20%, blaming recent pilot strike action, which might result in possible job losses for more than 100 pilots and 200 cabin crew.

The EU’s top court has ruled that gene-edited plants and animals fall under the same category as genetically modified and should be regulated as such, in a bitter blow to Europe’s biotech industry.

Daily Mail

Passport maker De La Rue has threatened to block one of its biggest shareholders, Crystal Amber, from asking awkward questions at today's annual meeting. 

 


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